January 20, 2015

Trading Up: The Evolution and Implementation of Intellectual Property Rights in U.S. Free Trade Agreements

Trading Up Cover

Intellectual property (IP) is a critical driver of economic growth and the development of new ideas, technologies, and solutions globally.  The increasing importance of IP in a global economy was recognized and advanced with the successful negotiation of the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Concluded almost 20 years ago, TRIPS established an important global baseline of IP protection and enforcement.

For the United States, IP-intensive industries are the foundation of its global competitiveness.  Recognizing the increasing growth of innovative and creative exports, a U.S. priority has been to negotiate robust IP protections through its bilateral and regional trade agreements.  If U.S. trade agreements are to meaningfully expand market access for these industries, modern and predictable IP rights, and the enforcement of those rights, are critical.

Yet negotiating high standard agreements is not enough.  The question is whether innovative and creative industries can rely on the commitments made on paper to be faithfully implemented and enforced.

The purpose of this report is to provide an initial assessment of whether U.S. FTA partners are abiding by their IP commitments.  To provide a snapshot of progress to date, this study covers four regionally and economically diverse countries – Australia, Canada, Chile, and Korea – which have negotiated trade agreements with the United States over the past 20 years.  For each country, this study examines implementation of ten core IP obligations across IP disciplines.

Overall, the study highlights that, while there are both positive implementation developments and challenges across all four countries, Australia has most successfully implemented its FTA obligations thus far.  Korea is a close second; however, given that the agreement only recently entered into force, it is still too early to tell whether Korea is faithfully implementing and enforcing all of its obligations.  Both Chile’s and Canada’s implementation track records lag significantly behind those of Australia and Korea.

Moreover, since the North American Free Trade Agreement (NAFTA), of which Canada is a party, was concluded a decade before the next agreement assessed (Chile), the IP chapter of NAFTA does not include many of the IP provisions assessed in this study.  For a better understanding of how Canada’s IP system would stack up against more recent U.S. FTA IP provisions, we also assessed Canada’s laws and practices against those obligations found in many of the United States’ post-NAFTA agreements.  Benchmarked against more recent FTAs, Canada would fall short in a number of categories.

Based on this assessment, this report offers the following observations and recommendations:

  • Over the past 20 years, the U.S. has secured more robust protections for innovators and creators through bilateral and regional FTA negotiations.  While the evolution of these provisions has not always been linear, the general trend in U.S. FTAs has been toward the inclusion of more detailed and robust FTA IP obligations.
  • More robust FTA obligations have translated into improved protections for innovators and creators. Achieving high standards for IP protection in FTAs is not the entire story, but it is an important first step.  Efforts of U.S. negotiators to secure strong IP commitments have led directly to positive results.
  • Despite the benefits secured by U.S. FTAs, there are significant failures in implementation by some countries.  While Chile stands out in particular for its failure to implement the majority of the commitments assessed in this study, implementation challenges exist across all four countries.
  • FTA commitments are meaningless if they are not consistently implemented and effectively enforced over time.  This assessment highlights the need to remain vigilant to ensure continued implementation of commitments even beyond entry-into-force.  For example, over the past nine years, Canada has departed from faithful implementation of NAFTA’s patentability standards, while reviews of IP laws in Australia are causing uncertainty for innovators and creators and could risk undermining FTA implementation efforts to date.
  • To achieve economically meaningful results, U.S. FTAs should be implemented fully and in a timely manner, and transition periods should be avoided or, where necessary, as short as possible.  This is critical to maintaining momentum for implementation of the agreement and securing durable and commercially meaningful new market access for innovators and creators as quickly as possible.
  • Further consideration should be given to how best to ensure ongoing implementation of robust IP commitments in U.S. trade agreements.  In light of the observations above, it is critically important that the U.S. ensure that its trading partners have the appropriate laws and regulations in place to implement their FTA obligations fully before entry-into-force.  If those efforts fall short as a practical matter, or a country becomes non-compliant with its FTA commitments after entry-into-force, the U.S. should use all tools at its disposal to ensure the United States’ trading partners are living up to their IP obligations.

These lessons are particularly important as the United States and 11 other Asia-Pacific countries are seeking to conclude an ambitious Trans-Pacific Partnership (TPP) Agreement.  The TPP could achieve significant new market access opportunities for IP industries provided the agreement includes enhanced, specific, and enforceable IP commitments.  At the same time, this assessment demonstrates that it will be critical to ensure implementation of those commitments before the agreement enters into force with each country.   More broadly, this study highlights the need for continued vigilance and, where appropriate, action after the ink on the FTA is dry.  Without a commitment to enforcement, the promise of a high-standard IP chapter risks going at least partially unfulfilled.


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